2021 (4) TMI 550 - HC - Income Tax

Assessment against amalgamating company held void where company ceased to exist; relief granted to taxpayer.

An assessment framed in the name of an amalgamating company that has ceased to exist is void because the approved scheme of amalgamation transfers ... Assessment against non-existing company is void - Amalgamation and successor liability - Notice under section 148 and assessment under section 147/144 - Principle that assessment in name of non-existent entity is substantive illegality - Territorial jurisdiction under Article 226(2)Assessment against non-existing company is void - Amalgamation and successor liability - Notice under section 148 and assessment under section 147/144 - Principle that assessment in name of non-existent entity is substantive illegality - Impugned notice dated 30th March, 2019 under section 148 and assessment order dated 31st December, 2019 passed in the name of M/s. Tecnovate Esolutions Pvt. Ltd. for AY 2012-13 are without jurisdiction and liable to be quashed. - HELD THAT: - Court found on the admitted facts that M/s. Tecnovate Esolutions Pvt. Ltd. had ceased to exist with effect from 1st April, 2010 pursuant to an approved scheme of amalgamation and that the petitioner is the successor company which had filed returns and undergone assessments for the relevant periods. Applying the legal principle affirmed by the Supreme Court in Maruti Suzuki and related authorities, the Court held that initiation of re-assessment and passing of an assessment order in the name of an entity which has ceased to exist is a substantive illegality and not a mere procedural infirmity. Consequently, the notice under section 148 and the subsequent order under sections 147 read with 144 in the name of the non-existing transferor company cannot be sustained and must be quashed. [Paras 7, 21, 22, 24, 25]Notice dated 30th March, 2019 and assessment order dated 31st December, 2019 in the name of M/s. Tecnovate Esolutions Pvt. Ltd. for AY 2012-13 are quashed.Territorial jurisdiction under Article 226(2) - Maintainability of the writ petition before the Bombay High Court under Article 226(2) of the Constitution despite the assessment order being passed by authorities in Delhi. - HELD THAT: - The Court examined the territorial jurisdiction question and, relying on settled authorities, held that if any part of the cause of action arises within the territorial limits of the High Court, the Court may entertain the writ petition under Article 226(2). On the admitted facts - that the petitioner as successor company is registered and stationed at Mumbai and that correspondence and prejudice to the petitioner arose in Mumbai - the Court concluded that a part of the cause of action arose within this State and that the Bombay High Court has jurisdiction to adjudicate the petition. The respondents' contention that jurisdiction lies exclusively with the forum at Delhi was rejected as lacking efficacy on the facts. [Paras 13, 16, 19, 25]Writ petition is maintainable before the Bombay High Court; the objection on territorial jurisdiction is repelled.Final Conclusion: The writ petition is allowed: the notice dated 30th March, 2019 under section 148 and the assessment order dated 31st December, 2019 in the name of M/s. Tecnovate Esolutions Pvt. Ltd. for AY 2012-13 are quashed; the Bombay High Court is held to have territorial jurisdiction to entertain the petition. Issues Involved:1. Propriety, legality, and validity of the notice dated 30th March, 2019 issued under section 148 of the Income Tax Act, 1961.2. Validity of the assessment order dated 31st December, 2019 passed under section 144 read with section 147 of the Income Tax Act, 1961.3. Jurisdictional issues regarding the issuance of the notice and the assessment order.4. Breach of principles of natural justice.5. Applicability of the legal principle concerning assessment orders against non-existing entities.Issue-wise Detailed Analysis:1. Propriety, Legality, and Validity of the Notice Dated 30th March, 2019:The petitioner challenged the notice dated 30th March, 2019 issued under section 148 of the Income Tax Act, 1961, arguing that it was issued to a non-existing entity, M/s. Tecnovate Esolutions Pvt. Ltd. (TSPL), which had ceased to exist post-amalgamation with M/s. Intelenet Global Services Pvt. Ltd. effective from 1st April, 2010. The petitioner contended that the notice was issued based on a misconception and was an inadvertent error.2. Validity of the Assessment Order Dated 31st December, 2019:The assessment order dated 31st December, 2019 was passed under section 144 read with section 147 of the Income Tax Act, 1961, computing the total income at Rs. 14,50,95,452/- in the name of TSPL. The petitioner argued that the order was passed without considering the replies and objections raised by the petitioner, and it was issued in the name of a non-existing entity, making it void ab initio.3. Jurisdictional Issues:The petitioner argued that the impugned notice and order were issued without jurisdiction as the proceedings should have been initiated by the officer having jurisdiction over the petitioner (i.e., respondent No. 3) and not respondent No. 1. The petitioner emphasized that post-amalgamation, any proceedings could only be initiated against the existing entity, Teleperformance Global Services Pvt. Ltd. (TGSPL).4. Breach of Principles of Natural Justice:The petitioner contended that they were not afforded any opportunity of hearing, and the notice dated 4th December, 2019 was neither served on the petitioner nor uploaded on the e-portal. This constituted a breach of the principles of natural justice.5. Applicability of Legal Principle Concerning Assessment Orders Against Non-Existing Entities:The petitioner relied on the Supreme Court's decision in Principal Commissioner of Income Tax, New Delhi Vs. Maruti Suzuki India Ltd. (2019) 416 ITR 613 (SC), which held that an assessment order passed in the name of a non-existing entity is a substantive illegality. The Supreme Court had observed that such an order is not a procedural violation and cannot be cured under section 292B of the Act. The petitioner also referred to other decisions, including CIT Vs. Spice Enfotainment Ltd. and CIT Vs. Micron Steels (P) Ltd., which supported the contention that assessment orders against non-existing entities are void.Conclusion:The court found merit in the petitioner’s arguments and held that the notice dated 30th March, 2019 and the assessment order dated 31st December, 2019 were issued without jurisdiction and were void ab initio as they were issued in the name of a non-existing entity. The court also acknowledged the breach of principles of natural justice and the jurisdictional issues raised by the petitioner. Consequently, the petition was allowed, and the impugned notice and assessment order were quashed and set aside. The rule was made absolute in terms of prayer clause (a), and the writ petition was disposed of accordingly.